Today’s US Dollar Trading
• USD volatility continues but majors hold gains
• S/R tested and some pairs hold
• Stops seen in USD/JPY and a weak close
Overnight Preview
• Look for follow-on selling of USD overnight
• USD is still forming a top
Looking Ahead to Thursday
All times Eastern (-4 GMT)
• 8:30am USD Core Retail Sales m/m
• 8:30am USD Retail Sales m/m
• 8:30am USD Unemployment Claims
• 10:00am USD Business Inventories m/m
• 10:00am USD Treasury Sec Geithner Speaks
• 10:30am USD Natural Gas Storage
Summary
Volatility was the rule again today but USD action was not as pronounced as yesterday’s whipsaw and the USD ended mixed against the majors to finish New York today. Most of the majors ended after testing important S/R areas and finishing the other side suggesting that the USD is continuing to top around current levels. Ending near the highs after a pullback during the day was GBP and EURO. GBP rallied to hold the 1.3800 handle after scoring highs at 1.3841 suggesting that the low-volume dip to the 1.3550 area overnight was a bear-trap. Further upside is likely if the rate can score the 1.3900 handle mid-week as the rate is overdue for a short-squeeze in my view. EURO rallied to a high print at 1.2817 where offers ahead of 1.2820 area capped initially; the rate fell back on short-selling to the 1.2740 area but regained the 1.2800 handle late in the session and holds in the 1.2790 area at this writing. Both GBP and EURO held important support overnight and extended highs during the day suggesting that although weekly highs are still higher in both pairs stops are likely from late shorts at or near the weekly highs in both pairs. USD/JPY found stops under the 97.80 area as expected and more at the 97.50 area; low prints initially at 97.17 before rallying to the 97.70 area but then fell off again for low prints at 97.02 clearing more stops from longs set on the dip; traders note that macro accounts were selling on the break most likely covering longs set earlier above the 98.50 and 99.00 area. USD/CHF is holding off the 100 day MA around the 1.1550 area with low prints at 1.1538 making for an inside range day; traders note that non-USD pairs for CHF also under selling pressure today suggesting that CHF is due for a further rally. USD/CAD is the sole pair better on the day with late high prints at 1.2905 before backing off a bit to the 1.2880 area; lows at 1.2749 missed stops said to be resting under the 1.2750 area and traders expect a further decline in the USD will likely pressure the rate lower overnight. In my view, the USD is continuing to sketch-out a top in current ranges. With USD/JPY making a low-close for the month today there are solid signs that the sentiment near-term is shifting to a pullback of some type. With more posturing and little action from government officials combined with a short-covering rally developing in equities the USD will likely suffer more selling as late longs bail and wait for a drop before trying the long side again; I think the bull side will be tougher going to end the week so aggressive traders can sell USD on rallies.
GBP/USD Daily
Resistance 3: 1.4050
Resistance 2: 1.4000
Resistance 1: 1.3920
Latest New York: 1.3885
Support 1: 1.3650/60
Support 2: 1.3600/10
Support 3: 1.3500/10
Comments
Rate two-way and recovers after a marginal new low into support overnight. 23 year lows in sight but the rate is attracting bids. Reversal off weekly lows a positive technical but the volume needs to come up and I think the shorts have yet to bail as a group. Likely an upside rally is still in the works but the rate needs to rebound hard to wash-out the shorts again. After yesterday’s action I think both sides will take a break. Traders report stops in-range adding for two-way action. Long-term tech resistance now at 1.5000 area likely to cap near term but stops are building above and the 1.5000 handle is a big psychological number. 23 year lows are very likely to hold on any break with long-term support at 1.3500 area now in play. Two-way action continues suggesting that shorts are aggressively adding and longs are trying to find a bottom. Short squeeze back on the board I think.
Data due Thursday: All times EASTERN (-4 GMT)
5:30am GBP Consumer Inflation Expectations
6:00am GBP CB Leading Index m/m
2:30pm GBP MPC Member Barker Speaks
EUR/USD Daily
Resistance 3: 1.2920
Resistance 2: 1.2880
Resistance 1: 1.2820
Latest New York: 1.2857
Support 1: 1.2550/60
Support 2: 1.2480
Support 3: 1.2450
Comments
Rate follows GBP in two-way action, holding support now above the 1.2720 area. Aggressive traders can add to open longs on this dip but BE CAREFUL as volatility is just huge. Test of today’s lows likely at this point but traders note big names on the buy side on dips under the 1.2600 and 1.2620 area. Upside stops likely cleared at the overhead resistance at 1.2720/30 area now with stops likely the other side. Key 1.3030 area likely next; failure to hold 1.2900 likely going to be the test for the bulls this week. Close above key 1.3030 area needed for further upside until then rallies likely to be sold so expect more two-way action. Bulls are still attempting to find a bottom. Technical levels around the 1.2920/50 area now likely to offer resistance so expect two-way action and consolidation underneath.
Data due Thursday: All times EASTERN (-4 GMT)
3:45am EUR French CPI m/m
3:45am EUR French Final Non-Farm Payrolls q/q
5:00am EUR ECB Monthly Bulletin
6:00am EUR PPI m/m
7:00am EUR German Industrial Production m/m
7:30am EUR ECB President Trichet Speaks
Join us for the Afternoon US Dollar Wrap-Up daily at 3:15 pm Central/Chicago time (GMT -6)
Forex Analysis by Forexpros.com – Written by Jason Alan Jankovsky
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